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Home Lifestyle Health

Why Your Health Insurance Costs Keep Rising 

October 22, 2025
in Health, News
Why Your Health Insurance Costs Keep Rising 
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Jacob McDonald knows he’s lucky to have a good health insurance plan through his employer, a tech company. But when his company started to send out emails recently updating employees about their options for health care in 2026 through open enrollment, he was disappointed to learn that once again, costs were going up.

To cover his family of four, McDonald, 47, a network engineer based in Dallas, Texas, is being asked to pay 6.5% more than he did last year towards health insurance. His $3,300 deductible, which he’s met every year since one of his children has a chronic health condition, is also going up next year by $100.

“I expected to pay more, but this is the largest increase I can remember,” he says.

He’s not wrong. Ballooning health care costs are driving up the price of employer-sponsored health care plans. Around 154 million Americans under age 65 rely on employer-sponsored coverage. And starting this month and into January, employees will be able to pick their plans for the next year during the open enrollment process—and this is when they’ll get a sense of just how much more they can expect to pay. One recent survey by Mercer found that employers expect to pay an average 6.5% more for health care for their employees in 2026, which is the highest increase since 2010. Another poll of employers by the Business Group on Health found that respondents projected health care costs to jump 7.6% in 2026, on average, the highest increase in over a decade.

While health care costs typically grow every year, the last few years have seen the steepest increase in prices for a while, according to Mercer. After a decade in which growth hovered around 3% annually, 2026 is the fourth consecutive year where costs have surpassed that mark.

A few factors are driving the cost surge. People are using their health insurance again, after a few years around the pandemic in which they stayed away from doctor’s offices and hospitals. More employees are using GLP-1s, which are extremely costly, to lose weight and stay healthy. And labor costs at hospitals and doctors offices are growing, says Matthew Rae, the associate director of the Program on the Healthcare Marketplace at KFF, a health care research organization.

“A combination of things puts pressure on premiums, but 6-7% is a meaningful increase,” says Rae.

KFF released a survey of 1,800 employers on Wednesday, Oct. 22 that found that premiums for a family of four on employer-sponsored health coverage were $26,993 in 2025, an increase of 6% from the previous year. (Workers contributed $6,850 of that cost, or 25%.) By comparison, workers’ wages grew just 4% over the same time period.

A big part of the increased costs of health insurance comes from overall inflation in the economy, which takes a while to work itself into the health care system, says Sunit Patel, senior partner and chief U.S. health actuary at Mercer. Doctors are charging more this year than they were last year, in part because of those inflationary pressures.

But another reason costs are rising is that people are using more services and a different mix of services than they did in the past. Telehealth has helped get more convenient care to people, increasing the number of claims insurers face, and “provider extenders” like nurse practitioners and physician assistants are enabling more people to get care.

“When you think about plan costs going up, part of it is that we, as a society, are using more health care services, and we’re getting a better mix of services available to us,” he says.

Read More: Telehealth Is About to Abruptly End for Seniors

Patel warns employees that depending on what health care services their colleagues use, their health insurance costs may go up more than 6.5%. That number, after all, is an average, and an employer who has had some big claims—like employees dealing with big health issues such as cancer—in the last year might need to raise costs even more, to 11 or 13%, for example.

The rising costs are forcing some employers to make difficult decisions—if they absorb the expenses to protect their employees, they may have to make cuts in other parts of their business. If they pass the price increases onto employees, they might face pushback.

“This is a really difficult place for a benefit professional to be in,” says Jim Winkler, chief strategy officer of the Business Group on Health. “It creates a ton of organizational conversation—what are we going to do differently?”

Indeed, after most employers get first quotes from health insurance companies on costs, they start to negotiate, eliminating some benefits or plan choices to bring costs down. Without those negotiations, for instance, Mercer estimates that plan costs would grow 9% in 2026 rather than 6.5%.

Read More: Health Insurance Is a Time Suck

This year will see 59% of employers making cost-cutting changes to their plans, according to Mercer, up from 48% making changes in 2025 and 44% in 2024. That could include no longer covering GLP-1 drugs, or raising deductibles and out-of-pocket maximums. About 60% of employers offering GLP-1 drugs in 2025 say that the cost has exceeded expectations, according to the KFF survey.

Health care costs have been rising faster than wages for more than two decades. A growing body of economic research suggests that these rising costs continue to depress wages for workers and contribute to inequality. That’s because Black and Latino families end up paying more and more of their compensation towards health insurance premiums than do white families, leaving them with less money in their pockets. Research also suggests that the more health care costs rise, the fewer jobs employers offer because they are spending the money instead on health care.

As workers get squeezed by rising prices, employers are trying to take even more radical steps to reduce health care costs. Some, for example, are declining to offer health care plans to their employees and are instead giving them subsidies and telling them to go find plans on the Affordable Care Act marketplace. That arrangement, called an individual coverage health care reimbursement arrangement, or ICHRA, has only been available since 2019. It’s still the preferred option for a growing group of employers, especially small businesses.

Yet it can be difficult for employers to change too much about health care plans, because they may lose employees as a result.

“The labor market is not as good as it was a couple of years ago, but it’s still pretty good,” says Rae, of KFF. “You can’t just give up employer benefits and send people to the wolves and still stay a competitive employer.”

Employers, however, are asking employees to contribute more. The average deductible that employees pay has increased 17% over the last five years and 43% over the last 10 years, and now stands at $1,886, according to the KFF survey.

Some consumer advocates worry that the growing costs of employer-sponsored health care plans are going to drive away employees who can’t afford the paycheck deductions. That could send them onto the Internet, where there appear to be lots of options for people who want to save money on health care—but most of those options aren’t actually health insurance.

“They might start Googling, and finding who knows what—health care sharing ministry plans, fixed indemnity plans, things that aren’t real health insurance,” says Louise Norris, health policy analyst for healthinsurance.org, an independent health insurance guide. (Health care sharing ministries are when people pitch in to cover other members’ health care expenses, but are not considered health insurance; fixed indemnity plans give patients small amounts of money to cover health care costs but are also not health insurance.) “People might not realize that what they’re seeing isn’t real health insurance.”

For most people, even with increased costs, a health insurance plan through their employer is the best deal they’re going to find if they want full coverage.

Read More: Rising Health Care Costs Are the Real Reason for the Government Shutdown

Indeed, even McDonald knows that he’s lucky to have generous benefits through his employer, although those benefits are getting more expensive. Like most employees, he pays a small fraction of the total cost of his plan. The COBRA, which allows laid-off workers to continue their same health care plan, is $4,000 a month, which represents roughly what it costs his employer to cover him. He only pays about 5% of that. Most employees pay 20% of the cost to employers.

But now he’s faced with another health care problem. He has been saving money for decades and had talked with his wife about retiring early next year. But then he’d lose his health care. He had planned on getting health insurance through the Affordable Care Act marketplace, but without Congressional action, generous premium subsidies are going to disappear at the end of 2025, which could make the average price of premiums go up by 75%.

Now, his wife thinks he needs to wait another year to retire, not because they don’t have enough money saved, but because they need some relatively inexpensive and good health insurance.

The post Why Your Health Insurance Costs Keep Rising  appeared first on TIME.

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